Option d. $5000 is the correct answer. The checkable deposit of the bank is $5000
Reserve Requirement is defined as the amount of funds that a bank is supposed to hold in reserve to ensure that it meets its liabilities in the case of an emergency withdrawal. It is a tool that is used by the central bank of an economy to increase or decrease the money supply.
Checkable Deposits are defined as a demand deposit account against which checks or drafts can be written.
We use the demand multiplier to calculate the checkable deposits.
A demand multiplier is referred to as the deposit multiplier ratio, which is the inverse of the required reserve ratio.
We know that the reserve requirement ratio is given as 20%,
therefore,
Deposit Multiplier Ratio = 1/0.20 = 5
We know the bank has $1000 in reserves, which means
The Checkable Deposit= Deposit Multiplier×reserves
= 5×1000
=$5000
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